Business Context and Reporting Period
Company: Southeast Airport Group (Grupo Aeroportuario del Sureste, S.A.B. de C.V.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Fourth Quarter and Full Year ended December 31, 2007
Release Date: February 20, 2008
Business Overview: ASUR is the first privatized airport group in Mexico, operating nine airports in the southeast region, including the major hub at Cancun. The company generates revenue from aeronautical services (landing fees, passenger taxes) and non-aeronautical commercial services (retail, duty-free, parking, advertising).
Key Financial Metrics
Fourth Quarter 2007 (vs. 4Q06)
- Total Revenues: Ps. 661.96 million (Increase of 13.58%)
- EBITDA: Ps. 377.88 million (Increase of 10.15%); Margin: 57.08%
- Operating Profit: Ps. 235.73 million (Increase of 10.33%); Margin: 35.61%
- Net Income: Ps. (190.84) million loss (vs. Ps. 136.05 million profit in 4Q06)
- Earnings Per Share (EPS): Ps. (0.6361)
- Passenger Traffic: 3.85 million total (Increase of 14.52% YoY)
Full Year 2007 (vs. FY06)
- Total Revenues: Ps. 2,785.89 million (Increase of 19.92%)
- EBITDA: Ps. 1,706.99 million (Increase of 24.87%); Margin: 61.27%
- Operating Profit: Ps. 1,166.17 million (Increase of 35.47%); Margin: 41.86%
- Net Income: Ps. 522.36 million (Decrease of 4.67%)
- Earnings Per Share (EPS): Ps. 1.7412
- Passenger Traffic: 16.24 million total (Increase of 17.84% YoY)
Liquidity and Balance Sheet (as of Dec 31, 2007)
- Cash and Marketable Securities: Ps. 1,925.70 million
- Total Assets: Predominantly Airport Facility Usage Rights and Concessions (80.09%)
- Total Liabilities: Ps. 2,170.55 million (6.72% of total assets)
- Shareholders' Equity: Ps. 14,505.53 million (93.28% of total assets)
- Capital Expenditures (FY07): Ps. 665.16 million
Material Changes vs. Prior Period
- Revenue Growth Drivers: Total revenue growth was driven by a 14.52% increase in passenger traffic and a 22.63% surge in non-aeronautical revenues. Commercial revenues per passenger rose 3.50% to Ps. 49.73.
- Cost Increases: Operating costs rose 15.46% in 4Q07, primarily due to a 23.85% increase in service costs (energy, maintenance, cleaning) linked to the operation of the new Terminal 3 at Cancun Airport, and a 13.62% increase in concession fees.
- Net Income Volatility: Despite strong operating profit growth, 4Q07 reported a net loss due to a significant one-time tax charge. Full-year net income declined slightly despite higher operating profits due to the same tax impact.
- Passenger Mix: Domestic traffic grew 26.65% in 4Q07, outpacing international traffic growth of 4.67%. Cancun and Cozumel were the primary drivers of international growth.
Outlook, Risks, and Unusual Items
Unusual Items: Tax Law Changes
The primary driver of the 4Q07 net loss was a change in Mexican tax law effective January 1, 2008. The introduction of the "Impuesto Empresarial a Tasa Unica" (IETU) and the elimination of the asset tax required a re-evaluation of deferred tax positions. This resulted in a cumulative charge to income of Ps. 489.1 million, comprising a new deferred IETU provision of Ps. 706.6 million, the elimination of a Ps. 150.0 million deferred income tax provision, and the recognition of a Ps. 217.4 million tax credit.
Operational Developments
The opening of Cancun Airport's new Terminal 3 in May 2007 significantly boosted commercial revenues through new retail, food and beverage, and advertising concessions. However, it also increased operating costs related to energy and maintenance.
Risks and Contingencies
- Regulatory Risk: The Mexican Ministry of Communications and Transportation regulates maximum rates for aeronautical services, which accounted for 68.68% of total income in FY07.
- Forward-Looking Statements: The filing includes standard disclaimers that future expectations regarding traffic and revenue are subject to risks and actual results may differ.
Investor Verification Checklist
- Tax Impact Sustainability: Verify if the Ps. 489.1 million tax charge is a one-time event or if the new IETU regime will structurally lower future net margins compared to EBITDA margins.
- Terminal 3 ROI: Monitor whether the revenue growth from new Terminal 3 concessions continues to outpace the increased operating costs (energy, maintenance) in subsequent quarters.
- Domestic vs. International Mix: Assess the sustainability of the 26.65% domestic traffic growth versus the slower 4.67% international growth, as international traffic typically yields higher commercial revenue per passenger.
- Regulatory Rate Reviews: Confirm the outcome of the annual review by the Ministry of Communications and Transportation regarding maximum tariff rates for the upcoming year.
- Cash Flow vs. Net Income: Reconcile the strong EBITDA and cash position (Ps. 1.9B) against the reported net loss to understand the true liquidity health of the company.